FTX CEO Admits Company Committed 'Sophisticated,' 'Old Fashioned Embezzlement'

John J. Ray, the new CEO of cryptocurrency exchange FTX, has admitted that the company committed embezzlement, defrauding investors of billions of dollars.

Speaking before the House Financial Services Committee on Tuesday, Ray said the company had "no record-keeping whatsoever" under former CEO Sam Bankman-Fried. He added that FTX employees were exchanging invoices and expenses on the workplace chatroom Slack and were only using QuickBooks to track the exchange's multibillion-dollar portfolio.

Quickbooks is an accounting tool developed by Intuit, the same financial software company behind TurboTax. The tool is typically used to track the portfolio of small and medium-sized businesses.

"This is really just old-fashioned embezzlement. This is just taking money from customers and using it for your own purpose. Not sophisticated at all," Ray said in his testimony. "Sophisticated, perhaps in the way they are hiding something, frankly, right in front of their eyes. This is just plain old embezzlement. Old school, old school."

FTX is a platform where people could buy and sell digital assets and currencies such as Bitcoin and Ether. The company was first founded by Bankman-Fried, known also as SBF, in 2019. The platform quickly gained international prominence for its low trading fees and aggressive marketing.

The collapse of the platform began on Nov. 2 after crypto publication CoinDesk published a leaked document showing that SBF held over $14.6 billion of assets through his hedge fund Alameda Research. At least $3.66 billion of the assets were "unlocked" FTT tokens issued by FTX. A separate $2.16 billion pile was labeled "FTT collateral," and more than $290 million were "locked FTT."

Following the report, Binance, a rival of FTX, announced it was selling off all its FTT tokens. The announcement caused FTT's price to drop and traders began withdrawing their assets from the platform. FTX struggled to process the requests for withdrawals, which amounted to $6 billion.

On Nov. 8, FTX stopped allowing customers to withdraw their assets but announced Binance was planning to buy the company, which would allow the platform to process withdrawal requests.

A day after the announcement, Binance said it had pulled out of the merger due to regulatory investigations and reports of mishandled funds.

On Nov. 11, SBF stepped down as the company's CEO. The companies he oversaw also filed for Chapter 11 bankruptcy after the Securities and Exchange Commission and the Department of Justice launched an investigation.

On Monday, Bahamas authorities arrested SBF after the U.S. Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government.